subject: Early Loan Payoffs And How They Affect Your Credit Score [print this page] When a lender approves your loan application, he does so under the impression that you will be making regular payments to him for the duration of the loan. Each of these payments includes a portion of interest, which is a payment you make to the lender to compensate him for offering you the loan.
The longer it takes you to pay the debt in full, the more interest the lender earns on the transaction. For this reason, lenders do not usually like it when you pay your loan off earlier than expected. Some lenders may even include a clause in your loan contract than imposes a monetary penalty if you pay off the loan earlier than you are supposed to.
Though lenders do not appreciate early pay offs, repaying a loan early will not harm your credit score. The major credit bureaus like to see debtors making their payments on time, and they do not mind if payments are made early. In fact, if your credit score is currently less than ideal, paying off a loan early may even help to raise it. However, if your credit score is already high, paying off a loan early will not raise it as dramatically as it would if you had a bad credit score.
Because you never know when you may need to pay a loan off early, you should always try to look for loans that do not impose penalties for early payoffs. This is especially important when shopping for a mortgage since most people will sell their home before the mortgage is paid or refinance at least once. If your mortgage has an early pay off penalty, selling your home or refinancing before your predetermined pay off date will trigger the clause and force you to pay a hefty sum to the lender.
To learn more about early pay offs, as well as other financial activity that may affect your credit score, visit CreditNowUSAs website at CreditNowUSA.com today. This website also offers information on many other useful subjects, such as qualifying for new loans and how to refinance existing debt.
For more information, go to Credit Score at http://www.creditnowusa.com/Credit-Score
